| Thu 30 May 2002, 0:00 | | Venfin Limited - Interim Report |
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VenFin Limited - Interim report
VenFin Limited
Registration number 1948/031037/06
ISIN ZAE000026498 Share code VNF
Interim report for the twelve months ended 31 March 2002
(Unaudited)
* Increase in pro forma headline earnings per share +9.2%
* R1 007.5 million invested during the twelve months
Consolidated Balance Sheet
Unaudited Audited
31 March 31 March
2002 2001
R million R million
ASSETS
Non-current assets
Property, plant and equipment 1 1
Goodwill and patents 108 132
Investments - Associated companies 6 492 4 263
- Other 1 867 1 435
8 468 5 831
Current assets 967 1 246
Cash and cash equivalents 908 1 003
Other current assets 59 243
Total assets 9 435 7 077
EQUITY AND LIABILITIES
Capital and reserves
Interest of own members 9 344 7 031
Current liabilities 91 46
Interest-bearing 5 5
Interest-free 86 41
Total equity and liabilities 9 435 7 077
Consolidated statement
of changes in equity
Unaudited Audited
Twelve months Year
ended ended
31 March 31 March
2002 2001
R million R million
Opening balance 7 031 3 999
Adjustment relating to redemption
Of British American Tobacco
Plc preference shares - 2 337
Net profit for the year 257 443
Exchange rate adjustments 2 072 235
Change in reserves of associated
companies 54 17
Shares held in treasury (70) -
Interest of own members 9 344 7 031
Abridged cash flow statement
Unaudited Audited
Twelve months Year
ended ended
31 March 31 March
2002 2001
R million R million
Net cash inflow from operating
activities 380 604
Investing activities* (474) (294)
Net increase/(decrease) in cash and
cash equivalents (94) 310
Cash and cash equivalents at the
beginning of the period 997 687
Cash and cash equivalents at the end
of the period 903 997
*Direct 474
Indirect by R&V Holdings Limited,
an associated company 561
Shares held in treasury (69)
Investment in Psitek 27
Proceeds on sale of investments 15
Invested during the twelve months 1 008
Consolidated income statement
Unaudited Audited
Twelve months ended Year ended
31 March 2002 31 March 2001
Company and Associated
its subsidiaries companies Total Total
R million R million R`m R`m
Revenue 219 219 126
Operating profit before
depreciation 140 140 73
Depreciation (1) (1) (1)
Finance costs (37) (37) (6)
Operating profit 102 102 66
Amortisation of goodwill (6) (37) (43) (25)
Impairment of goodwill (22) (2) (24)
Impairment of investments (78) (159) (237)
Equity adjustment:
Share of net profit
before taxation of
associated companies 691 691 685
Exceptional items (43) 3 (40) (123)
Profit before taxation (47) 496 449 603
Taxation (28) (164) (192) (160)
NET PROFIT/(LOSS) (75) 332 257 443
Reconciliation of
headline earnings:
BASIC EARNINGS - net
profit/(loss) (75) 332 257 443
Plus/(minus) - attributable
to own members:
- Exceptional items 44 (3) 41 118
- Amortisation of
goodwill 6 37 43 25
- Impairment of
goodwill and
investments 100 161 261 -
HEADLINE EARNINGS 75 527 602 586
Reconciliation of pro forma
headline earnings:
HEADLINE EARNINGS -
reported 75 527 602 586
Minus - adjustments
relating to e-tv - (46) (46) (77)
PRO FORMA HEADLINE
EARNINGS 75 481 556 509
Earnings per share
HEADLINE EARNINGS
(cents) 14.4 101.0 115.4 112.3
- Diluted 14.4 101.0 115.4 112.3
BASIC EARNINGS
(cents) (14.4) 63.6 49.2 84.9
- Diluted (14.4) 63.6 49.2 84.9
PRO FORMA
HEADLINE
EARNINGS (cents) 14.4 92.1 106.5 97.5
- Diluted 14.4 92.1 106.5 97.5
Additional information
31 March 31 March
2002 2001
Shares in issue
- Ordinary shares of 1 cent each 486 493 650 486 493 650
B ordinary shares of 10 cents
each 35 506 352 35 506 352
Total shares in issue 522 000 002 522 000 002
- Shares held in treasury
(ordinary shares of 1 cent each) (3 800 000) -
518 200 002 522 000 002
Weighted shares in issue 521 876 714 522 000 002
- In determining the headline earnings, basic earnings and pro forma
headline earnings per share the weighted number of shares in issue was used.
- In determining diluted headline earnings, basic earnings and pro forma
headline earnings per share the weighted number of shares in issue was
adjusted for the dilutive effect of the Company`s long-term share incentive
scheme.
Net asset value per share (rand)
- At book value R18.03 R13.47
- At market value and directors`
valuation* of investments R30.08 R25.48
(*Refer to note under Annexure B)
R million R million
Listed investments
Associated
- Book value 146 13
- Market value 122 107
Other
- Book value 1 673 1 197
- Market value 2 897 1 808
Unlisted investments
Associated
- Book value 6 346 4 250
- Directors` valuation* 11 484 9 934
Other
- Book value 194 238
- Directors` valuation* 194 238
(*Refer to note under Annexure B)
Capital commitments
(Including amounts authorised, but not
yet contracted) 25 -
Dividends received
- Dividends included in operating profit 28 17
- Dividends of associated companies
set off against investments 2 66
Impairment of goodwill and investments
Provision for impairment of goodwill and investments in respect of Camus (an
investment of R&V Holdings Limited, an associated company of VenFin),
iTouch, e-Company and Fundamo, which are still in a start-up phase, has been
made to reflect the possible risks associated with the investments.
Exceptional items
Exceptional items of subsidiary
companies consist of the following:
- Provision against loan advanced (81) (77)
- Cost of restructuring - (3)
- Net capital surplus on the sale
of long-term investments 38 16
(43) (64)
- Taxation effect (1) -
(44) (64)
Share of exceptional items of associated
companies after taxation 3 (54)
- Profit/(loss) on realisation
of investments - (38)
- Investments written off and
provisions 8 (29)
- Tax effect - 5
- Other (5) 8
Total - attributable to own members (41) (118)
Comments
ACCOUNTING POLICIES
The interim report is prepared on the historical cost basis in accordance
with South African Statements of Generally Accepted Accounting Practice and
incorporates policies which have been consistently applied and correspond
with those of the previous financial report in all material respects.
CHANGE IN YEAR-END
The results for the twelve months, which ended on 31 March 2002, have not
been audited as the Group changed its year-end from 31 March to 30 June. The
change was necessary to enable the Group`s service company, M&I Group
Services (Pty) Limited, to deal with both VenFin Limited`s and Remgro
Limited`s financial year-ends without incurring additional management costs
by appointing additional financial staff.
The Group will release audited results for the fifteen-month period ended 30
June 2002.
PRO FORMA HEADLINE EARNINGS
Due to the material effect that the equity accounted results of e-tv will
have on the results of VenFin if the Independent Communication Authority
approves the conversion of the loan to equity, the pro forma headline
earnings are presented on the basis that the attributable portion of e-tv`s
loss is accounted for as a loss in an associated company and not as an
exceptional item.
FINANCIAL REVIEW OF INVESTMENTS
The headline earnings of the Group on a pro forma basis for the twelve
months increased by 9.2% from 97.5 cents to 106.5 cents per share.
The increase in earnings must be assessed taking the composition of the
Group`s earnings into account. This is discussed more fully below.
The most important source of the Group`s headline earnings for the past
twelve months consists of the Group`s share of the net income of Vodacom
Group (Pty) Limited (Vodacom) (13.5% interest), income from R&V Holdings
Limited (R&V) (33.3% interest) and interest received from other cash
resources.
Associated companies
Vodacom
Vodacom again performed very well with a 36.9% increase in headline
earnings to R2 447.9 million and an EBITDA margin (earnings before interest,
tax, depreciation and amortisation) of 34.9%. The subscriber base on 31
March 2002 was as follows:
South Africa 6 556 820
Tanzania 228 491
Lesotho 56 549
DRC 21 116
6 862 976
R&V
The income of R&V consists mainly of interest earned on cash and on
the Alexander Forbes Limited bond.
The decrease in the earnings of R&V is mainly attributable to lower
interest received due to lower interest rates, less cash and non-recurring
income earned in the previous year of R77 million.
Cash resources
The other main source of headline earnings consists of net interest received
on cash in South Africa and abroad and amounted to R89.0 million (2001:
R60.0 million) in the twelve months under review, in spite of lower average
interest rates in South Africa and the redeployment of cash into new
investments.
Other investments
The other investments performed satisfactorily in difficult market
conditions, with a headline loss of R38.7 million (2001: R75.9 million). The
majority of these investments is still in a development phase and will only
contribute to the Group`s earnings over the medium to long term.
An analysis and detailed composition of the performance of the various
investments appears in Annexures A and B.
Exchange rate differences
Positive exchange rate differences arising on translation of offshore assets
to SA rand at 31 March 2002 amounted to R2 072 million and were credited
directly to reserves. Based on current exchange rates at 29 May 2002 this
would have only amounted to approximately R1 900 million increase in net
asset value.
INVESTMENTS
VenFin is continually involved in evaluating potential investments and
acquisitions, both within South Africa and abroad. VenFin focuses on high
growth technology investments which possess proprietary intellectual
property with international potential.
A total of R1 007.5 million was invested during the twelve months, of which
R377.1 million was invested in South Africa and R630.4 million abroad.
The most important changes in VenFin`s investment portfolio for the twelve
months under review were as follows:
GenuOne Incorporated (GenuOne)
During the twelve months under review a further loan of $2.2 million was
granted to Certus International Socit Anonyme (Certus) in addition to an
original loan of $1.5 million. The total amount was convertible into equity
based on certain capitalisation events. A 30% interest in Certus was also
bought from a third party for $1.5 million.
During November 2001, Certus was acquired by GenuOne for shares in GenuOne.
VenFin`s total loan of $3.7 million in Certus was also converted into equity
in GenuOne and an additional $2.5 million was invested in the newly merged
entity. VenFin also holds warrants to invest a further $2.5 million in the
merged entity, exercisable over three years. At 31 March 2002, VenFin`s
effective interest in GenuOne was 25%.
GenuOne is an innovative provider of comprehensive brand security solutions
and offers a fully integrated approach to the protection of intellectual
property. Its technology and integration services maximise brand dominance
and minimise counterfeiting, product diversion, licensing/royalty fraud and
intellectual property theft in the physical world and, through the
acquisition of Certus, on the Internet. GenuOne`s authentication, tracking
and control technologies combined with its integration services allow
companies to monitor products throughout the world.
e-tv
e-tv is the only independent free-to-air television broadcaster in South
Africa. During April 2000 VenFin granted an indirect, interest-free loan of
R281.8 million to Sabido, the holding company of e-tv. An additional R38.6
million was advanced to Hosken Consolidated Investments Limited (HCI) for e-
tv during the twelve months under review. If these loans had been converted
into equity in Sabido, VenFin`s indirect interest in e-tv would have been
26% and would have been accounted for as an investment in an associated
company. Pro forma headline earnings are presented to account for the
earnings after conversion to an associate. VenFin also advanced a further
loan to HCI for R280 million on 7 January 2002 to buy Warner Brothers`
interest in e-tv and to meet other funding requirements of e-tv. This loan
is interest bearing and fully secured by HCI`s interest in Vodacom.
Psitek (Proprietary) Limited (Psitek)
During December 2001, VenFin acquired an additional 12.4% of Psitek for
R27.0 million. At 31 March 2002, the interest was 33.1%.
Southern African Investments Limited (SAIL)
VenFin had an interest of 35.9% in Luna Corporation Limited (Luna) at 31
March 2001. Luna was the holding company of SAIL which is listed on the JSE
Securities Exchange South Africa. Luna`s holding in SAIL was unbundled on 26
September 2001 and after the unbundling, VenFin held a direct interest of
30% in SAIL. SAIL acquired Vodacom Sport and Entertainment (Pty) Limited
(VSE) from Vodacom during the twelve months and issued new shares to the
management of VSE. SAIL, in co-operation with VenFin, also entered into an
empowerment transaction with AKA Capital on 22 February 2002 in terms of
which VenFin sold 20 million of its SAIL shares to AKA Capital. On 31 March
2002 VenFin held an interest of 19.5% in SAIL.
Intervid Limited (Intervid RSA)
During June 2001 VenFin acquired a further 1 000 000 shares in Intervid RSA
at a cost of R6 million. At 31 March 2002, the interest in Intervid RSA was
17.5%.
FRS Financial Reporting Solutions (Proprietary) Limited (FRS)
The VenFin Board approved an investment of R20 million to acquire a 33.33%
shareholding in FRS on 28 March 2001. This investment will be made in
tranches when certain milestones are met by FRS. During July 2001 an
investment of R6 million was made for an effective 18.4% interest. During
October 2001, an additional R2 million was invested in FRS which brought
VenFin`s interest to 21.3%. Another R2 million was invested in January 2002.
At 31 March 2002, the interest was 24.0%.
FRS provides high quality financial reporting software solutions that are
compliant with International Accounting Standards and industry-specific
legislation governing financial reporting. FRS is actively involved in the
development of XBRLr (eXtensible Business Reporting Language) which is a
global initiative for the standardisation of electronic business reporting,
and is the appointed representative of the XBRLr organisation in Africa.
Veritas Venture Partners (Cayman) L.P. (Veritas)
VenFin has approved the acquisition of an interest in VVP Fund II, L.P. for
the sum of $1.5 million of which $150 000 has already been paid. VVP Fund
II, L.P. is based in Israel and is a venture capital fund managed by
Veritas. The fund invests in technology opportunities which originate in
Israel.
Fundamo (Proprietary) Limited (Fundamo)
Through a further investment of R5.0 million, VenFin increased its interest
in Fundamo to 41.6% during the twelve months under review.
R&V
R&V made the following investment during the twelve months under review:
Intervid International AG
RFS Holdings Limited Jersey, a wholly owned subsidiary of R&V, funded
Intervid International during April 2001 in the sum of $50 million. The
funding was effected by way of a loan which is compulsorily convertible into
equity in Intervid International or Intervid RSA within four to six years
from the date of advance. The percentage interest in Intervid International
will depend on the performance of Intervid International (minimum interest
of 30% and maximum interest of 50%).
Buy-back of VenFin shares
During March, VenFin`s wholly owned subsidiary, VenFin Securities (Pty)
Limited, acquired 3 800 000 ordinary shares of VenFin for a total amount of
R69.8 million. This transaction did not have a material effect on earnings
or earnings per share.
DIRECTORATE
Messrs GT Ferreira and John Newbury were appointed as non-executive
directors on 28 November 2001.
SECRETARY
On 28 November 2001, Mrs M Lubbe was appointed as Company Secretary in place
of Mr JC Engelbrecht who has retired.
STRATE
The Company`s shares were transferred to the new STRATE system of electronic
settlement on 12 November 2001.
Shareholders who have not yet dematerialised their shares are advised to do
so immediately, or at least before the closure of the Dispossessed Members
Fund. It is not the intention of STRATE to continue with this fund after
September 2002.
DIVIDENDS
No dividend is proposed for the twelve months ended 31 March 2002.
Signed on behalf of the Board of Directors.
Johann Rupert Josua Malherbe
Chairman Chief Executive Officer/Deputy Chairman
Stellenbosch
30 May 2002
Annexure A
Composition of revenue and headline earnings
Pro forma
Headline VenFin`s
Effective % Revenue earnings share
interest at R million R million R million
31 March 31 March 31 March 31 March
2002 2002 2001 2002 2001 2002 2001
Intervid 17.49 71.1 88.8 (12.7) 19.5 (1.9) 0.7
SAIL 19.53 108.9 72.9 20.6 16.5 5.6 3.0
Tracker 32.14 154.2 107.3 24.9 (12.4) 6.9 -
Psitek 33.09 133.7 47.1 27.9 2.9 6.4 0.6
Inala 23.88 101.4 117.5 6.0 4.6 1.1 1.4
Other 115.5 60.5 (83.5) (38.9) (11.3) (4.5)
6.8 1.2
e-tv (loan) 26.00 280.0 178.1 (175.1) (296.7) (45.5) (77.1)
Vodacom 13.50 16 186.7 13 263.5 2 447.9 1 788.4 330.5 241.4
R&V 33.33 185.3 295.1
477.1 460.6
Net interest 100.00 89.0 60.0
Corporate 100.00 19.4 13.4
Net manage-
ment fees 100.00 (29.5) (24.8)
556.0 509.2
509.2
Annexure B
Composition of net asset value per share (rand)
31 March 2002 31 March 2001
Book value Valuations Book value Valuations
Listed 3.60 5.83 2.40 3.67
Unlisted 2.55 12.37 2.42 12.75
R&V 10.14 10.14 6.74 7.15
Cash 1.74 1.74 1.91 1.91
Total 18.03 30.08 13.47 25.48
Market price 17.90 17.05
Note:
Pending the valuations by an independent third party of investments as at 1
October 2001 for capital gains tax purposes, a process which is under way
and will be completed by the year-end, the directors` valuations of
investments have been retained, as reflected in the interim report on 30
September 2001. At year-end evaluations will be based on independent
valuations as calculated for capital gains tax purposes.
Directors and administration
Directors
Johann Rupert* (Chairman),
Josua Malherbe (Deputy Chairman/Chief Executive Officer),
Piet Beyers*, Jan Dreyer*, Jan Durand, GT Ferreira*, John Newbury*
(*Non-executive)
Secretary
Mariza Lubbe
Listing
JSE Securities Exchange South Africa
Sector: Telecommunications
American depositary receipt (ADR) program
Cusip number 759905508 ADR to ordinary share 1:1
Depositary
The Bank of New York, 620 Avenue of the Americas, New York NY 10011
Business address and registered office
Quantum Street, Techno Park, Stellenbosch 7600
(PO Box 456, Stellenbosch 7599)
Transfer Secretaries
Computershare Investor Services Limited, 41 Fox Street,
Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Auditors
PricewaterhouseCoopers Inc.
Sponsor
Rand Merchant Bank Corporate Finance
Date: 30/05/2002 05:10:02 PM Produced by the SENS Department
